Thursday, April 7, 2011

Post QE2 Trading with (MSFT) (DELL) (HPQ) (WMT) (PG)

As QE2 winds down plays that look the best continue to be commodity-based companies and blue chips stocks with low valuations.

The latter group would include companies such as Microsoft (NASDAQ:MSFT), Dell (NASDAQ:DELL), Hewlett-Packard (NYSE:HPQ), Wal-Mart (NYSE:WMT) and Procter & Gamble (NYSE:PG).

Some companies, to give an example, which wouldn't fit into that scenario wold be Caterpillar (NYSE:CAT) and Deere (NYSE:DE). It's not that they're not great companies to hold, just that they have most of the optimism already priced into them. The assumption for some investors with them is they believe the profit margins will remain strong at the two companies, which isn't a surety in any way. They've become risky at these levels.

The reason blue chip stocks like those listed above are a solid bet, is as mentioned, the current valuations, but also the ability of the larger companies to be able to pass on higher costs of inputs.

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